All or nothing play for the next year

Nov 16th, 2009 – Comment

My call on END is to treat it like a pure one shot exploration play. If Rochelle hits in 2010 you will see a reversal of the downtrend and ride some gains. But its an all or nothing play for the next year so put a stop in at $0.85.


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endv

Lou,

I got your link off  the Duralex Energy International (DXE TSXV)and was very impressed and agree with your evaluation.

I  have a position in END, and for the life of me cannot figure out what’s keeping the stock price at these levels. I suspect that the overhang of the Smedvig debt instruments might have something to do with it, but would very much appreciate any light you could shine on this puppy.

Thanks.

Robb
Austin, Texas

Hi Robb,

Thanks for the assignment from the Lone Star State! Endeavor International Corp. ( END AMEX) has been operating since 2004 and has made some interesting moves over the last five years. The deal with the Smedvig Family Office is a debenture that is due in 2014 that pays a 11.5% coupon in stock. A family office is a European portfolio management structure operated on behalf of  high net worth individuals.

Each year Smedvig increases its position in END and like other investors have accepted a level of risk for an anticipated return. The debentures convert at $2.36 per share so at this point there would be little reason to trigger the option. Expect the Smedvig interest to continue until there is a premium to the conversion.

The company has three development projects in the U.K. sector of the North Sea and exploration projects onshore in the United States. END sold its interest in a Norwegian subsidiary for $150M and is self funding its projects.

The go forward plan is to have its North Sea play at Rochelle in production by 2010. END has a 55.6% interest and is the operator of the field. In 2011 the company has forecast production flowing from two other fields with smaller carried interests of 12.5% and 25%.

endThe three year chart tells the tale of what happens when the price of oil falls from a high of over $140 US per barrel then catches a rebound. But the recovery from the lows has been broken as the company repositions itself to exploit the high impact drilling in the North Sea.

There is support at $1.00 and END needs to hold at these levels to catch a bounce and get the momentum turning to the upside.

end2The three month chart provides a view of the current action and the resistance along the 50 day moving average and the support at $1.00. The dip in August was driven by the duster they reported in the North Sea.

My call on END is to treat it like a pure one shot exploration play. If Rochelle hits in 2010 you will see a reversal of the downtrend and ride some gains. But its an all or none play for the next year so put a stop in at $0.85.

Happy Capitalism!

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